Nvidia & UK Left for Dead

Nvidia ended Monday’s session down almost 17%. It was the largest single day, single stock market cap loss ever. Fears that DeepSeek’s efficiency gains will require less chips.

The market cap loss exceeded the total market cap of many blue-chip companies.

The breakthrough questioned the true exceptionalism of the US, which has dominated equity markets for the past decade.

As investors, should we consider opportunities that are not priced to perfection? Will value opportunities once again present an opportunity? One of the regions that stands out is the UK. Trading almost as cheap as China, a region deemed uninvestable by some.

In 2016, UK markets were trading at similar valuations to US markets, but the UK discount has since risen steadily.

Almost every sector looks cheap compared to their 20 year median valuation vs the US.

The UK stands out as one of the cheapest regions globally on an ROE vs price to book basis.

Valuations look very reasonable on a historical basis.

UK companies are trying to do something about their cheap stocks by engaging in buybacks.

The main index, the FTSE 100, mainly consists of multinational companies with less than a quarter of their revenues coming domestically.

The FTSE 250 has much more exposure to the domestic economy.

However, earnings estimates have consistently disappointed.

Investors have fairly consistently fled the UK over the past few years, likely rotating to chase US stocks higher.

Part of this can be explained by the state of government affairs, running large deficits and causing an exodus of taxpayers.

"Labour's tax plans trigger exodus of millionaires." Net 10,800 gone in 2024. 78 of those centi millionaires (worth £100m plus). 12 billionaires. One gone every 45 mins...Reminder: it takes 39 people on £40k to replace just the income tax paid by one person on £500k.